RBI urges banks: The Reserve Bank of India has communicated with state-run and private banks to avoid significant bets against the currency in a move to stabilise the Indian rupee hovering near record lows. The informal directive follows reports that the rupee stands on the edge of breaching its record low of 83.9850 per US dollar.
According to sources familiar with the situation, RBI communicated these instructions over the phone earlier this week. This is being seen as some form of “oral intervention” under the deliberations after the period of heavy market volatility where the rupee’s value has to be kept in check. RBI , as is well known, has always been stepping in to support the rupee, and similar actions have recently been recorded in early August.
The rupee has faced numerous issues, on top of which a flow of portfolio outflows this quarter amid oil price increases and a strengthening US dollar, especially after recent data subdued hopes for a significant rate cut by the Federal Reserve. Overseas investors have withdrawn $4 billion from Indian equities in the last four trading sessions, according to recent data.
Brent oil prices surged to an eight-month peak as tensions in the Middle East increased, boosting the benchmark. As a consequence, market analysts think RBI would want to protect the critical threshold of 84 against the dollar; though a senior banker claims that it might not let it breach this threshold in the near term.
Traders have also pointed out RBI ‘s interventions in the non-deliverable forwards and local spot markets to stabilise the currency. Although the rupee has declined by 0.3 per cent recently, analysts at MUFG Bank feel that the RBI will remain the prime player in regulating sharp movements of the currency. As the situation unwinds, it is evident that initiatory actions by the RBI ensure the stability of the currency when global economic pressures prevail.
